Sunday, 23 August 2015

The labour party is seemingly about to appoint a leader, Jeremy Corbyn, who almost everyone considers unelectable as prime minister. The apparent 'problem' with Mr Corbyn is that he is too left wing. But, according to simple political choice theory this should be an asset rather than a problem. So, where is the catch?

Let us look first at the basic theory. To win an election a candidate (or party) needs majority support. Now, we all know that wealth is highly asymmetrically distributed - the top 1% own most of our wealth, the top 10% own even more, and so on. The flip side of this asymmetry is that the poorest 50% are a relatively homogeneous bunch that should, in principle, easily be able to gang up on the rich. To be a more specific, they could vote for redistribution of wealth from the rich to the poor and the rich would be powerless to do anything about it.

In some countries the theory seems to work pretty well. Both Vladimir Putin, in Russia, and Cristina Fernandez de Kirchner, in Argentina, have, for example, done a pretty good job of ruining their respective economies - inflation is rampant, growth low, international relations shattered, markets far from open, and so on. Yet both Putin and Fernandez de Kirchner are hugely popular. There popularity comes from keeping enough poor people, like pensioners, happy.

Overall, though, the theory that left is best seems woefully wide of the mark. Centre right parties dominate in Europe and most Western countries. (And the Democrats in the US are surely centre right relative to the norm elsewhere.) So, where does the theory go wrong?

We can all agree that being poor is undesirable. But what is the fix for that? One option is to redistribute from rich to the poor and essentially equalise things by making the rich poorer. Another option is to give opportunities for the poor to become rich. In most countries the second option seems more appealing. So, the fact that 50% of people are poor does not stand for much because those same people aspire (or aspired) to be rich. They want a party that will back them in their quest to move up in the world, not one that will give them more cash now.

Social mobility, therefore, makes it as if 50% of the population are rich because at least 50% of the population are voting as if they were rich. This turns the tables in favour of centre right parties. But, only if enough people believe in social mobility. In Russia and Argentina they presumably don't, and who came blame them. In the UK there is a much stronger belief that anyone can succeed if they try hard enough. Which is why the Labour party would be shouting themselves in the foot big-time by appointing Jeremy Corbyn.